About financial freedom through personal money management, passive income, growth & shrinkage via assets, and the DUH!s in life which I wish someone could have told me earlier.
All ideas and opinions are just that - I'm just writing from learning, personal experiences and perspectives. You should use your own good judgment to ascertain whether they make sense or not.
Copyright Wong Mun Keong. All Rights Reserved.

Sunday, May 4, 2008

As in any investments, the approach should cover Exit Points - either to stop-loss, lock-in profits or rebalance asset allocation.

Stop-loss:Given that a fund is performing badly (vs. investment in other funds during that period OR vs. other funds in the same sector) after 1 year-ish of holding, look into switching to a fund which I'd think would better performing for the coming year or two.

So far, I'm "lucky" enough to do this only once so far and it is due to "testing water" of a property focussed fund BEFORE the subprime issue.

Lock-in Profits:Sell or switch when a investment transaction hits a profit target

Rebalance:When an asset type is more than X% (usually 5%) of planned allocation

Personal approach:Personally, my long term expected average returns pa. from equity funds is 10% and bond funds 5%. Why these figures? Heheh - based on statistics of an index fund (10 years) which I have access to daily data since launched + others, the average pa. returns ranges from 8% pa to 12% pa.

If a particular transaction has already locked-in profitsAND hits abnormal returns pa.AND the 50% of the profit run is >= $2,500THENSwitch 66.67% (2/3 lar) profits to a different country/sector or asset (equity to bond or vice-versa)AND leave 33.33% (1/3 lar) profits to run (again I take profits and "cut losses short, let profits run" here)

Based on my own tracking PER BUY TRANSACTION and dividing reinvested dividends per buy transactions, most of my transactions' returns hitting above 16% pa will tend to drop after that. My Public Regional Sector and Prudential SmallCap hit >=20%+ pa returns and pulled back within 3 to 4 months after that. Thus, my personal approach helps me:- take expected profits and cost back- while leaving enough to "let the profits run" (in my case, abnormal profits)- control downturns due to crazy exhuberant market getting logical (called a "market correction)- rebalancing

I switch rather than sell back to the Funds House / redeem because I do not need the $ to live on, thus, I'd rather reinvest at NAV. FYI - selling/redeeming for cash AND buying back in incurs commission charges).

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About Me

An average Malaysian chap who awoke one day to the BS of most insurance and financial agents who cant even calculate returns per annum and future value of $ required, let alone "advice" and guide average Joes properly.
Shh... I'll tell you a secret - most of them are really just Sales people who mastered the art of looking as if they care.
Please note though, there are great ones around like Brian Goh (yeah you dude!) from GreatVision. He's my "goto guy" for mortgages and insurance advise/options.
If you want the Excel files shown here for your own usage, please do email me & tell me specifically which (usage).
Facebook: wongmunkeong@yahoo.com